Newly chosen members of the 275-member assembly took their oaths in a ceremony attended by regional diplomats and UN officials who promised to support the latest of more than a dozen attempts to restore order to the Horn of Africa.
Leaders of Somalia's major tribes have been meeting in the Kenyan capital since October in an attempt to end 13 years of fighting.
They hope to establish the first effective central government since 1991, when warlords ousted former leader Muhammad Siad Barri before turning on each other, plunging the country into chaos.
As traditional Somali dancers and singers performed, former enemies took their oaths on Sunday and celebrated the parliament's first official meeting.
"All of us, we are very happy. We are smelling the fruit of national unity," said Abd Al-Kadir Farah Gulid, a parliamentarian from the north-eastern Puntland region who was sworn in.
Participants in the peace process, funded by the European Union, the United Nations, Somalia's neighbours and China, must still find a way to disarm the factions who seemingly control the country. But there was optimism on Sunday that at last there was a forum to discuss the issue.
"Somalia, today has - at last - a parliament, a transitional but fully legitimate parliament, since all of the Somali political and military and traditional forces have been involved in its formation," said Italian ambassador Carlo Calia, the lead EU diplomat at the talks.
"It is a good start. Go ahead now and form your government, show responsibility, moderation, and a spirit of compromise together with intelligent understanding of your political realities and possibilities," Calia told the new lawmakers.
An initial group of 196 parliamentarians were sworn in last week, when the 275-member assembly was originally supposed to begin work.
But the start was delayed because one of the country's four major clans had not finished selecting its representatives.
Somalis brace themselves for an
end to 13 years of fighting
Seventy-six lawmakers were sworn in on Sunday, bringing the total at the inauguration ceremony to 270. The other five nominees were either outside Kenya or too ill to attend, said Kenyan diplomat Bethuel Kiplagat, chief mediator at the talks.
Kiplagat said the transitional parliament would get down to business immediately, choosing a speaker whose first duty will be to preside over the election of a president. The president will then nominate a prime minister to form a government.
"We'll go ahead with the election of a speaker," he said. "We can not wait until they (the remaining five members of the transitional parliament) are all selected."
According to a charter signed by delegates in January, Somalia's four major tribes each get to select 61 members to the parliament, and one coalition of small clans gets 31 members.
Winston Tubman, special envoy of the US Secretary General, said a new government should be able to take control quickly now that every armed faction was represented in the parliament.
"What is more important is that all neighbouring states are here, in the past disgruntled factions have formed alliances with neighbouring states," Tubman said. "The international community should step up quickly and offer full backing to this government."
The US Assistant Secretary of State for African Affairs, Constance Newman, visited Nairobi on Saturday. Newman said the Bush administration would look into ways to support the new Somalian government, but would not take the lead in the peace process.
"We will look at ways to be more supportive," Newman said.
The Intergovernmental Authority on Development, a seven-member regional body that has led the talks, should continue to be the primary mediator, she said.
Somaliland, a breakaway northern region of Somalia, is not part of the deal. Its president said it would enter a deal only with a legitimate government in southern Somalia and not the warlords.